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Are you an educated investor?(21 posts)

Are you an educated investor?moneyman
Dec 5, 2003 9:41 AM
Take this quiz offered by the National Association of Securities Dealers (NASD), the self-regulatory agency for the securities industry.

It was offered by the NASD to 1,086 investors. Only 35% of them passed.

I scored 100%, but I would be worried if I didn't.

What did you get?

Nah, I'll just skip the test and send my money to you. nmOldEdScott
Dec 5, 2003 9:47 AM
Have another drink. nmNo_sprint
Dec 5, 2003 9:53 AM
94%dr hoo
Dec 5, 2003 9:59 AM
I missed this one:

In general, investments that are riskier tend to provide higher returns over time than investments with less risk.

I was fooled by the "over time part. I was not sure if over time was short term or long term. Sure, I know higher rewards come with the risk, but so do higher losses. Basically I overthought it. Stocks vs. bonds, which does better over time, and which has more risk? I should have had it.

Oh well, I'll take my A.
That was a bad question,TJeanloz
Dec 5, 2003 10:13 AM
The "in general" and "over time" were the tip-off that they wanted you to think about the theory, rather than the actuality. I suppose on the average, this is true, but with more risk there is, well, more risk.
it was an ambigously worded question. but overall...dr hoo
Dec 5, 2003 12:57 PM
... I think it was a pretty good test. Consider the scores moneyman reported.

It's not like they asked questions like:

"What would it mean if a trader made a "bearclaw" motion in front of his face, then held four fingers in front of his forehead, palm out?"

THAT would be a bad question on a general test.
Dec 5, 2003 10:08 AM
89%. I got the one wrong about long term return of stocks. I thought 10% was too high, but 5% too low, but that 5% was closer to the truth. Not.

Also the one about your broker selling stock after a margin call. Never have bought stock on margin.

funny thing: i got a survey from Strong Investments after I moved my IRA account from them. They wanted to know why. I just took a black sharpie and wrote across the form "BECAUSE YOU'RE CROOKS"
Yes (nm)PmbH
Dec 5, 2003 10:10 AM
10 out of 18...oldbutslow
Dec 5, 2003 10:11 AM
but, I misread 3 of the questions. Does that mean I can quit my job in aerospace and work on Wall Street, or, do I have to fail it miserably first??? :)
89%Live Steam
Dec 5, 2003 10:16 AM
I got two wrong. One has no correct answer. " In general, investments that are riskier tend to provide higher returns over time than investments with less risk. That is what we expect, but it's not the rule.

I also got the no load mutual fund question wrong. "Fees" vs "sales charges"? There must be a difference, but I don't know what they are.
fees vs. sales chargesdr hoo
Dec 5, 2003 10:59 AM
Sales charges are put on your movements of money in and out of the funds (load/no load). Fees are charged for having the money sit there.
Thanks for clearin' that up Dr. Boohoo :O)Live Steam
Dec 5, 2003 11:36 AM
I thought I would lighten things up a bit. You have to admit that was a funny by No_Sprint.

I haven't invested in a mutual fund in years. The last time I had money in one was in the late 80s in a Vanguard fund. I peruse their returns in the paper, but I generally do as well at least it appears so. I always read about the odd fund or two with +30% returns, but they are usually sold out to preferred clients and insiders.
Turn that frown upside down! :) nmNo_sprint
Dec 5, 2003 12:40 PM
first time i've heard that one in 7 years with this nick.dr hoo
Dec 5, 2003 1:08 PM
So, you earn all those bonus points for originality.

I kick in pretax to some funds, very low fee and solid track record. I have 30 years, so short term means squat.

And no, I am not in the "social justice" fund. It underperforms. And like a good capitalist, I don't put my money with losers.

Please note: I said LIKE a good capitalist.
Money doesn't <i>sit</i> there...moneyman
Dec 5, 2003 12:18 PM
Its managed. That's what the fees are for - you are paying for the manager's expertise. Let me put it in a way you might understand it. Students pay tuition to universities for sociology professors in the hopes they are taught something, more than they could learn on their own. Investors pay fees to managers in the hopes they make money for them, more than they could earn on their own. Both produce, at times, disappointing results.

Does that bring it into your realm of relevancy?

sittin' there from MY perspective!dr hoo
Dec 5, 2003 1:00 PM
Well, not lately... its been up. And fees are .3-.4ish on my funds.

Sorry to offend thee, O leech on the capitalist shark.

No smiley for YOU!
Missed one...but it was a lousy questionPaulCL
Dec 5, 2003 10:31 AM
The one about 15 days until sellout in a margin account. I made the invalid assumption that there was no further movement down in the security for this question. Since I'm in the business, I had a tendency to address the questions in terms of practical day to day activity, not the letter of the law. Oh well...I ain't perfect!
11of 18--I am a financial moron--I know that without the testColnagoFE
Dec 5, 2003 10:32 AM
89%Jon Billheimer
Dec 5, 2003 11:19 AM
I missed the last two, but forgive myself on Question 18 since I'm not familiar with American tax regs! This is funny since I haven't taken a finance course or been active in the market for about 25 years:)- So if only 35% of "investors" passed this quiz I'd say American investors have been seriously brain damaged by environmental toxins...or somethin':)- But this is probably true of Canadian investors, Europeans, etc. A little surprising to me.
15 of 18.rufus
Dec 5, 2003 11:48 AM
missed the margin call(forgot about the money still owed the broker), the different mutual fund classes, and the question about risk(assumed big gains would be offset by bigger losses). if i'd have just thought of it as stocks vs. bonds, it would have made sense.
15 outta 18 -- weak on bonds. What's a passing score? nmPdxMark
Dec 5, 2003 3:26 PM